Drivers delay car buying and spend less
Drivers are increasingly putting off buying their next car, according to the latest AA Financial Services Car Purchase Index (CPI).
Those surveyed in the AA/Populus poll of over 18,000 AA members who plan to buy a car in the next 24 months will spend less than those who responded to the survey last year. It's also clear from the research that people are more than three times more likely to save for their next car, than take out a loan: nearly two-fifths (39%) saying they will use savings.
The findings suggest that car owners are hanging on to their existing cars for longer. Only a third (33%) say they expect to buy a car within the next 24 months, compared with 42% last year while two thirds (36%) say they ‘have no plans' to change their car, compared with 28% a year ago.
Fewer buyers say they will opt for a brand new car with only 19% saying that they plan to do so; 2% fewer than last year.
Mark Huggins, director of AA Savings, says the findings suggest that many car owners are concerned about how far their money will stretch.
"Buying a car - whether it's brand new or a used one - is a big commitment and at a time of increased financial pressure, including fast-rising car running costs, it drops down the list of priorities. It seems that people prefer to save for their car and allow interest to contribute towards its cost, rather than increase their debt with a loan. As a result, they are keeping their existing model until they can afford the car that they want.
"In addition, the successful car scrappage scheme which ended in March 2010 encouraged many people to opt for a brand new car, giving a welcome boost to the motor industry. Since then VAT has increased from 17.5% to 20%, adding around 500 to the typical cost of a new car."
Buyers spending less
The most popular price-band in the CPI Index remains 5,000 to 10,000, with 29% saying they will spend this much.
But, the figure has been steadily falling from 35% in 2009 and 32% last year. Those expecting to spend less than 5,000 however, has increased to 26%, (from 19% two years ago and 23% last year).
Young drivers remain the most financially stretched with 10% of those aged 18-24 expecting to spend less than 1,000 on their car compared with 3% two years ago.
"The fall in average expected spend over the past two years is very marked and suggests that people are being careful with their money and marking time until the economy and job security improves," says Mark Huggins. "But the number of more comfortably-off buyers aged 55 and above planning to spend over 15,000 on a car, has remained at about a quarter of all buyers (27% this year) for the past thee years. It's these buyers who are also most likely to be able to afford a brand new car."
How will you pay for yours?
The most popular way to buy a car is to save for it, the AA's Index confirms.
Two-fifths (39%) say they will use their savings to buy a car but this is nevertheless a 2% fall compared with last year. But only 11% say they plan to take out a personal loan: a drop of almost half from the 20% recorded two years ago.
"People seem to be finding other ways to pay for a car, too," Mark Huggins says. "The number cashing in investments (7%) or using ready cash (10%), such as redundancy money or pension lump sums has risen slightly.
"The luckiest people are those who can benefit from a loan or gift from close relatives. In fact more than twice as many 18-24 year olds (10% compared with 4% last year) seem set to enjoy such generosity.
"But there's no escaping from the fact that the outlook in new car showrooms doesn't look good with only 19% planning to buy a brand new car, compared with 22% last year, if the AA's findings are anything to go by. But for buyers, it means that there are likely to be some good deals to be done for those prepared to bargain."